CIT v. Ganapati Finance Ltd. - Taxpublishers.in

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The Tax Publishers2013 TaxPub(DT) 0342 (Del-HC) : (2013) 212 TAXMAN 0278 : (2013) 082 DTR 0049 INCOME TAX ACT, 1961 --DepreciationAllowability Lease-cum-sale back transaction vis-a-vis financing business--Assessee-company was engaged in financing business. In the return of income assessee claimed depreciation on leased out assets, being L & G cylinders and Air Jet spindle Assembly and Positar Disc. The documentary evidence shows that L&G cylinders were purchased from Aravalli and leased to 'Janta'. Evidence was also adduced to show similarly that the air jet spindle assembly and positar disc were purchased from Rajaji and leased to 'Maruti'. The assessing officer rejected assessee's claim of depreciation on the ground that it was only a finance transaction and not a lease-cum-sale back transaction. Both the lower appellate authorities allowed assessee's claim. *Held:* The Tribunal seems to have proceeded merely on the basis of the documentary evidence without putting it to rigorous examination in the light of aspects highlighted by the assessing officer. In the case of LPG cylinder, the transaction was only a financing transaction and not a lease as there was no material to show that the assessee became the owner of the cylinders and leased them to Janta, in the case of air jet spindles and positar disc the very existence of the assets and genuineness of the purchase of assets by the assessee was not proved. In both the cases the assessee was, therefore, not entitled to depreciation. Aravalli is undisputedly a manufacturer of cylinders. It is also agreed that the manufacture of such cylinders are strictly controlled and regulated, having regard to the safety aspects, etc. The assessing officer has referred to the relevant regulations (under the Explosives Act and Gas Cylinders rules) which stipulate that a manufacturer of LPG cylinders cannot manufacture the cylinders unless an order has been placed on it by a person who (a) has the licence to fill the gas cylinders, i.e., known as a parallel manufacturer (b) supplied the manufacturer with the drawings duly approved by the department of explosives and the Bureau of Indian Standards and (c) supplied the manufacturer a logo to be affixed on the cylinder after the manufacture of the cylinders. Janta is the parallel manufacturer. It placed an order with Aravalli by letters dated 5-9-1994 and 17-12-1994 for the supply of the cylinders. It was not the assessee which placed the order as it would be expected of it if it were to become the owner of the cylinders so that it can lease them to Janta. It was only on 22-3-1995 that Janta claimed to have written to Aravalli authorising the latter to sell and raise the invoice against the assessee. This letter was improperly addressed and did not reach the Aravalli. In the statement of R, director of Aravalli, recorded on 6-12-1997 by the assessing officer he denied having sold the cylinders to the assessee and affirmed having sold them to Janta. He stated that the cylinders cannot be sold to the assessee because it did not have the requisite permission to bottle the gas or the approval from the Department of Explosives. He stated that the assessee did not supply the drawings or the logo as required by the regulations to enable Aravalli to sell the cylinders to it. He also affirmed that the order was placed by Janta who supplied the logo, specifications and the drawings; that Aravalli has been manufacturing cylinders for Janta earlier also. [Para 8] The assessing officer specifically put the letter dated 22-3-1995 allegedly written by Janta to Aravalli authorising it to sell the cylinders to the assessee, to Aravalli for its response. Aravalli by its letter dated 26-3-1998 addressed to the assessing officer denied having received any such authorisation from Janta. It may be noted that the address given in the letter allegedly written by Janta to Aravalli was M/s. Aravalli Cylinders, opposite Turkman Gate, Delhi. Janta did not produce any proof that the letter was received by Aravalli, such as acknowledgement card of the postal authorities or certificate of posting or any other evidence. [Para 9] Janta, expectedly, asked for cross-examination of R. The assessing officer managed to produce one M.P. the managing director of Aravalli, on 4-3-1998 and offering him for cross-examination to the assessee. The assessee refused to do so on the ground that the statement was given by R and not by M.P.. The assessing officer seems to have recorded a statement from M.P. on the aforesaid date. In that statement, M.P. stated that he was appearing in the place of R who was indisposed, that he was entitled to appear in his capacity as managing director of Aravalli, that even R gave the statement only on behalf of Aravalli and not in his own behalf, that he (M.P.) stood by whatever R had stated in the statement and that the representative of the assessee refused to cross-examine him for reasons best known to him. A copy of the statement of M.P. was given to the assessee on 18-3-1998. [Para 10] The assessing officer also collected evidence from the principal officer of Janta which had placed the order on Aravalli for the manufacture of the cylinders. A show-cause notice was issued on 19-1-1998 asking it to clarify whether (a) it can purchase cylinders for parallel marketing as per governmental guidelines from the assessee which has not manufactured the cylinders as per the approved drawings and (b) how it can claim that the cylinders were sold by Aravalli to the assessee, when the order was placed by it (Janta) on Aravalli and not by the assessee. No satisfactory reply was furnished by Janta to these pointed queries except reiterating that the assessee was the lessor, being rightful owner of the cylinders and it (Janta) was only a bailee. [Para 11] In the above state of evidence, with respect, this court is unable to hold that the findings recorded concurrently by the Commissioner (Appeals) and the Tribunal are reasonable and rational, and could have been reached by any person duly posted of the facts and the legal position. The inferences drawn are unreasonable. The order is placed by Janta on Aravalli; that was sometime in September and December, 1994. All of a sudden and without any reason or explanation Janta claims to have authorised Aravalli to sell the cylinders to the assessee. The receipt of the letter allegedly written by Janta to Aravalli was denied by the latter; the fact that the letter bore an incomplete address of Aravalli lends support to its claim of non-receipt of the letter. Janta had no evidence to show that the letter had actually been received by Aravalli. If the letter was not received by Aravalli, there was no other basis upon which it would have looked upon the assessee as the owner of the cylinders, to have them delivered to it. That in turn would mean that there was no privity of contract between Aravalli and the assessee for the sale of the cylinders. The assessee could not have therefore become, by any standards, the owner of the cylinders. No motive can be, and was in fact, attributed to Aravalli when it denied the receipt of the letter. [Para 12] As for the payment, even Aravalli admits that it received the money from the assessee. That alone does not however constitute the assessee as the owner of the cylinders. In the absence of the authority letter from Janta, the cylinders would have certainly been delivered only to Janta. There is no evidence led by Janta to show that it wanted to ascertain whether its request had been accepted by Aravalli. On the other hand, the fact that Janta wrote to Aravalli only on 22-3-1995 after a long lapse of time from the date it placed the order (4-6 months), and that too towards the close of the accounting year, sends different signals. Till that date, the assessee obviously was not in the picture at all; the contract was between Janta and Aravalli. The assessee's name crops up only on 22-3-1995 by which date the assessee would have had a clear picture of its profits. The significance of this fact should be kept in mind. The lease agreement between the assessee and Janta was also entered into three days later, i.e., on 25-3-1995. [Para 13] The cumulative effect of the facts as noted above and the surrounding circumstances strongly indicate that it is only a case of the assessee financing the purchase of the cylinders; the lease rent constituting the compensation for the financing by the assessee of the transaction of purchase of the cylinders by Janta from Aravalli. [Para 14] The fact that the assessee was not afforded an opportunity to cross examine R does not derogate from the evidentiary value of the other facts and the inferences appropriately to be drawn from them. The surrounding circumstances, such as the entering into of the lease arrangement at the fag end of the financial year and the failed attempt of Janta to show that it wrote to Aravalli authorising it to sell the cylinders to the assessee, are all pointers to an after-thought to give what was essentially a financing transaction a colour of a lease so as to entitle the assessee to claim the benefit of depreciation. R, as pointed out by M.P., gave his statement to the assessing officer only on behalf of the company Aravalli, of which he was a director. If he could not appear on 4-3-1998, the date on which the assessee was invited to cross-examine him on account of indisposition, the assessee could still have availed of the opportunity to cross-examine M.P., who was Aravalli's managing director. The strict rules of the Evidence Act are not applicable to proceedings under the Income Tax Act; but the basic principles such as rules of natural justice are incorporated into the proceedings by the statute (Income Tax Act) and it was in this spirit that the assessing officer offered M.P. for cross-examination to the assessee. The assessee chose not to avail of it; that was at its own risk. Court is inclined to believe that if Janta had written to Aravalli on 22-3-1995 that the cylinders should be sold to the assessee and if on the same day the assessee had entered into the lease agreement with Janta, it could not have been possible without prior arrangement between the assessee and Janta, and in that case there would have been some verification or cross-checking by the assessee with Aravalli whether Aravalli is in the know of the arrangement. In that case, such knowledge on the part of Aravalli could have been brought out during the cross-examination of M.P. At any rate, the assessee could have revealed its cards to Aravalli to belie the latter's claim that it was not aware that the assessee has been, by an arrangement between it and Janta, constituted the owner of the cylinders. The assessee, however, took a technical and obstinate position that it was only R, who gave the original statement, who would be cross-examined and not M.P. The conduct of the assessee -taking a technical and prudish stand - was obviously untenable; it leads to an inference that it had nothing to gain by availing of the opportunity afforded by the assessing officer. [Para 15] The main ground on which the Tribunal accepted the assessee's claim was that the denial by Aravalli of the receipt of Janta's letter dated 25-3-1995 was not material in the light of the fact that the invoices were raised on the assessee and there was a ledger account in the name of the assessee in Aravalli's books. The Tribunal ought to have appreciated that the assessee's case need not necessarily be genuine or true merely because there was documentary evidence in its support. Firstly, the assessee did not place the order with Aravalli for the supply of cylinders. The order was admittedly placed by Janta as parallel manufacturer; the assessee could not have, under the relevant statutory regulations/rules, placed any order for the supply of LPG cylinders. Secondly, there is no evidence to show that the letter allegedly written by Janta on 22-3-1995 to Aravalli authorising the latter to sell and raise the invoice on the assessee was received by Aravalli; in fact, Aravalli's denial of the receipt stands uncontroverted. Aravalli had nothing to gain or lose by the denial, unless it was the truth. Thirdly, the assessee did not avail of the opportunity to confront Aravalli's managing director M.P. Mahipal with all the documentary evidence which it (the assessee) claimed to possess, such as the invoices drawn on it and the ledger account in its name in Aravalli's books. That was the best opportunity the assessee had to prove its case that it was the owner of the cylinders which it leased to Janta. Fourthly, the discharge receipt issued by Aravalli to the assessee acknowledges the receipt of the three cheques, all dated 20-3-1995, even prior to the authorisation claimed to have been issued by Janta to Aravalli. The discharge receipt no doubt says that the cheques were received 'towards supply of empty cylinders on your behalf to M/s. Janta Gases Pvt. Ltd. vide Bill Nos. 110, 111 & 112, but that by itself does not prove that the relationship between the assessee and Janta is that of lessor-lessee. The receipt does not show the nature of relationship that existed between the assessee and Janta. All that the receipt says is that the cylinders were supplied to Janta on behalf of the assessee. That would have been the position even if the assessee had merely acted as financier. Above all, R's statement is categorical and clear, as evident from the answer to a question posed by the assessing officer. [Para 19] The assessee was unable to prove the purchase of the assets from Rajaji, nor was Rajaji able to furnish the details of the sale of the assets to the assessee. While in the case of LPG cylinders the assessing officer did not doubt the existence of the assets but took the view that the nature of the transaction between the assessee and Janta was one of a financing and not that of lease, in the case of airjet spindile and positar disc the very existence of the assets, and consequently the claim of ownership of the assets, is suspected. There was no reason why Rajaji, from whom the assessee claims to have purchased the assets, should not furnish the relevant particulars and chose to evade the notices/summons issued by the assessing officer. It ultimately furnished only skeletal particulars a mere affirmation of the sale, that too, without charging sales-tax as the copy of the invoice showed. Its sales-tax registration number and income-tax PAN number were not capable of proper verification, leading to the very existence of Rajaji coming under grave suspicion. The assessing officer acted fairly by asking Maruti, to whom the assets were claimed to have been leased by the assessee, to produce the relevant assets inward register and explain the mode by which they were transported to its factory. This evoked a response which cannot be countenanced that no such registers were being maintained by Maruti, and a very unusual or strange plea that the assets were transported by their own cars, which are passenger cars and not goods vehicles; even then, the assessing officer was fair enough to ask them to show their log books showing the movement of the cars, which could not be produced as they were not maintained. There was thus precious little material before the assessing officer from which he could accept the plea of ownership or even the existence of the assets for the purpose of claiming depreciation. [Para 24] The Commissioner (Appeals) did no better than the assessee as the quoted paragraph from his order would show. The Tribunal proceeded to view the paper-work as sacrosanct even when there was enough material to excite its suspicion. The fact that there was a lease document, insurance policy, accounting entries in the books of the assessee, security offered by Maruti, issue of legal notices on Maruti for default in the payment of lease installments and so on, described by the Tribunal as 'overwhelming evidence', are all facts which are neutral and would have to necessarily exist in support of the claim for depreciation. The question before the Tribunal really was whether the assessee can be said to have discharged its burden of proving ownership over the assets in the light of the inability of Rajaji to explain the supply of the assets and the complete lack of material in the records of Maruti, the alleged lessee, to show the receipt of the assets into its factory. It seems with respect, that the Tribunal failed to probe the transaction and look beyond the documentation and to apply the standard of proof required of the assessee to prove ownership of the assets, even when there was no real evidence worth the name in favour of the assessee. [Para 25] The Tribunal ought to have applied these judgments to test the evidence adduced by the assessee in the light of the material gathered by the assessing officer, the conduct of the parties and other surrounding circumstances. The Tribunal, with respect, seems to have proceeded merely on the basis of the documentary evidence without putting it to rigorous examination in the light of the aspects highlighted by the assessing officer. In the case of LPG cylinders, the transaction was only a financing transaction and was not a lease as there is no material to show that the assessee became the owner of the cylinders and leased them to Janta; in the case of air jet spindles and positar disc, the very existence of the assets and the genuineness of the purchase of the assets by the assessee was not proved. In both the cases, therefore, the assessee was not entitled to depreciation. [Para 26] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0342 (Del-HC) : (2013) 212 TAXMAN 0278 : (2013) 082 DTR 0049

INCOME TAX ACT, 1961

--DepreciationAllowability Lease-cum-sale back transaction vis-a-vis financing business--Assessee-company was engaged in financing business. In the return of income assessee claimed depreciation on leased out assets, being L & G cylinders and Air Jet spindle Assembly and Positar Disc. The documentary evidence shows that L&G cylinders were purchased from Aravalli and leased to 'Janta'. Evidence was also adduced to show similarly that the air jet spindle assembly and positar disc were purchased from Rajaji and leased to 'Maruti'. The assessing officer rejected assessee's claim of depreciation on the ground that it was only a finance transaction and not a lease-cum-sale back transaction. Both the lower appellate authorities allowed assessee's claim. Held: The Tribunal seems to have proceeded merely on the basis of the documentary evidence without putting it to rigorous examination in the light of aspects highlighted by the assessing officer. In the case of LPG cylinder, the transaction was only a financing transaction and not a lease as there was no material to show that the assessee became the owner of the cylinders and leased them to Janta, in the case of air jet spindles and positar disc the very existence of the assets and genuineness of the purchase of assets by the assessee was not proved. In both the cases the assessee was, therefore, not entitled to depreciation.

Aravalli is undisputedly a manufacturer of cylinders. It is also agreed that the manufacture of such cylinders are strictly controlled and regulated, having regard to the safety aspects, etc. The assessing officer has referred to the relevant regulations (under the Explosives Act and Gas Cylinders rules) which stipulate that a manufacturer of LPG cylinders cannot manufacture the cylinders unless an order has been placed on it by a person who (a) has the licence to fill the gas cylinders, i.e., known as a parallel manufacturer (b) supplied the manufacturer with the drawings duly approved by the department of explosives and the Bureau of Indian Standards and (c) supplied the manufacturer a logo to be affixed on the cylinder after the manufacture of the cylinders. Janta is the parallel manufacturer. It placed an order with Aravalli by letters dated 5-9-1994 and 17-12-1994 for the supply of the cylinders. It was not the assessee which placed the order as it would be expected of it if it were to become the owner of the cylinders so that it can lease them to Janta. It was only on 22-3-1995 that Janta claimed to have written to Aravalli authorising the latter to sell and raise the invoice against the assessee. This letter was improperly addressed and did not reach the Aravalli. In the statement of R, director of Aravalli, recorded on 6-12-1997 by the assessing officer he denied having sold the cylinders to the assessee and affirmed having sold them to Janta. He stated that the cylinders cannot be sold to the assessee because it did not have the requisite permission to bottle the gas or the approval from the Department of Explosives. He stated that the assessee did not supply the drawings or the logo as required by the regulations to enable Aravalli to sell the cylinders to it. He also affirmed that the order was placed by Janta who supplied the logo, specifications and the drawings; that Aravalli has been manufacturing cylinders for Janta earlier also. [Para 8] The assessing officer specifically put the letter dated 22-3-1995 allegedly written by Janta to Aravalli authorising it to sell the cylinders to the assessee, to Aravalli for its response. Aravalli by its letter dated 26-3-1998 addressed to the assessing officer denied having received any such authorisation from Janta. It may be noted that the address given in the letter allegedly written by Janta to Aravalli was M/s. Aravalli Cylinders, opposite Turkman Gate, Delhi. Janta did not produce any proof that the letter was received by Aravalli, such as acknowledgement card of the postal authorities or certificate of posting or any other evidence. [Para 9] Janta, expectedly, asked for cross-examination of R. The assessing officer managed to produce one M.P. the managing director of Aravalli, on 4-3-1998 and offering him for cross-examination to the assessee. The assessee refused to do so on the ground that the statement was given by R and not by M.P.. The assessing officer seems to have recorded a statement from M.P. on the aforesaid date. In that statement, M.P. stated that he was appearing in the place of R who was indisposed, that he was entitled to appear in his capacity as managing director of Aravalli, that even R gave the statement only on behalf of Aravalli and not in his own behalf, that he (M.P.) stood by whatever R had stated in the statement and that the representative of the assessee refused to cross-examine him for reasons best known to him. A copy of the statement of M.P. was given to the assessee on 18-3-1998. [Para 10] The assessing officer also collected evidence from the principal officer of Janta which had placed the order on Aravalli for the manufacture of the cylinders. A show-cause notice was issued on 19-1-1998 asking it to clarify whether (a) it can purchase cylinders for parallel marketing as per governmental guidelines from the assessee which has not manufactured the cylinders as per the approved drawings and (b) how it can claim that the cylinders were sold by Aravalli to the assessee, when the order was placed by it (Janta) on Aravalli and not by the assessee. No satisfactory reply was furnished by Janta to these pointed queries except reiterating that the assessee was the lessor, being rightful owner of the cylinders and it (Janta) was only a bailee. [Para 11] In the above state of evidence, with respect, this court is unable to hold that the findings recorded concurrently by the Commissioner (Appeals) and the Tribunal are reasonable and rational, and could have been reached by any person duly posted of the facts and the legal position. The inferences drawn are unreasonable. The order is placed by Janta on Aravalli; that was sometime in September and December, 1994. All of a sudden and without any reason or explanation Janta claims to have authorised Aravalli to sell the cylinders to the assessee. The receipt of the letter allegedly written by Janta to Aravalli was denied by the latter; the fact that the letter bore an incomplete address of Aravalli lends support to its claim of non-receipt of the letter. Janta had no evidence to show that the letter had actually been received by Aravalli. If the letter was not received by Aravalli, there was no other basis upon which it would have looked upon the assessee as the owner of the cylinders, to have them delivered to it. That in turn would mean that there was no privity of contract between Aravalli and the assessee for the sale of the cylinders. The assessee could not have therefore become, by any standards, the owner of the cylinders. No motive can be, and was in fact, attributed to Aravalli when it denied the receipt of the letter. [Para 12] As for the payment, even Aravalli admits that it received the money from the assessee. That alone does not however constitute the assessee as the owner of the cylinders. In the absence of the authority letter from Janta, the cylinders would have certainly been delivered only to Janta. There is no evidence led by Janta to show that it wanted to ascertain whether its request had been accepted by Aravalli. On the other hand, the fact that Janta wrote to Aravalli only on 22-3-1995 after a long lapse of time from the date it placed the order (4-6 months), and that too towards the close of the accounting year, sends different signals. Till that date, the assessee obviously was not in the picture at all; the contract was between Janta and Aravalli. The assessee's name crops up only on 22-3-1995 by which date the assessee would have had a clear picture of its profits. The significance of this fact should be kept in mind. The lease agreement between the assessee and Janta was also entered into three days later, i.e., on 25-3-1995. [Para 13] The cumulative effect of the facts as noted above and the surrounding circumstances strongly indicate that it is only a case of the assessee financing the purchase of the cylinders; the lease rent constituting the compensation for the financing by the assessee of the transaction of purchase of the cylinders by Janta from Aravalli. [Para 14] The fact that the assessee was not afforded an opportunity to cross examine R does not derogate from the evidentiary value of the other facts and the inferences appropriately to be drawn from them. The surrounding circumstances, such as the entering into of the lease arrangement at the fag end of the financial year and the failed attempt of Janta to show that it wrote to Aravalli authorising it to sell the cylinders to the assessee, are all pointers to an after-thought to give what was essentially a financing transaction a colour of a lease so as to entitle the assessee to claim the benefit of depreciation. R, as pointed out by M.P., gave his statement to the assessing officer only on behalf of the company Aravalli, of which he was a director. If he could not appear on 4-3-1998, the date on which the assessee was invited to cross-examine him on account of indisposition, the assessee could still have availed of the opportunity to cross-examine M.P., who was Aravalli's managing director. The strict rules of the Evidence Act are not applicable to proceedings under the Income Tax Act; but the basic principles such as rules of natural justice are incorporated into the proceedings by the statute (Income Tax Act) and it was in this spirit that the assessing officer offered M.P. for cross-examination to the assessee. The assessee chose not to avail of it; that was at its own risk. Court is inclined to believe that if Janta had written to Aravalli on 22-3-1995 that the cylinders should be sold to the assessee and if on the same day the assessee had entered into the lease agreement with Janta, it could not have been possible without prior arrangement between the assessee and Janta, and in that case there would have been some verification or cross-checking by the assessee with Aravalli whether Aravalli is in the know of the arrangement. In that case, such knowledge on the part of Aravalli could have been brought out during the cross-examination of M.P. At any rate, the assessee could have revealed its cards to Aravalli to belie the latter's claim that it was not aware that the assessee has been, by an arrangement between it and Janta, constituted the owner of the cylinders. The assessee, however, took a technical and obstinate position that it was only R, who gave the original statement, who would be cross-examined and not M.P. The conduct of the assessee -taking a technical and prudish stand - was obviously untenable; it leads to an inference that it had nothing to gain by availing of the opportunity afforded by the assessing officer. [Para 15] The main ground on which the Tribunal accepted the assessee's claim was that the denial by Aravalli of the receipt of Janta's letter dated 25-3-1995 was not material in the light of the fact that the invoices were raised on the assessee and there was a ledger account in the name of the assessee in Aravalli's books. The Tribunal ought to have appreciated that the assessee's case need not necessarily be genuine or true merely because there was documentary evidence in its support. Firstly, the assessee did not place the order with Aravalli for the supply of cylinders. The order was admittedly placed by Janta as parallel manufacturer; the assessee could not have, under the relevant statutory regulations/rules, placed any order for the supply of LPG cylinders. Secondly, there is no evidence to show that the letter allegedly written by Janta on 22-3-1995 to Aravalli authorising the latter to sell and raise the invoice on the assessee was received by Aravalli; in fact, Aravalli's denial of the receipt stands uncontroverted. Aravalli had nothing to gain or lose by the denial, unless it was the truth. Thirdly, the assessee did not avail of the opportunity to confront Aravalli's managing director M.P. Mahipal with all the documentary evidence which it (the assessee) claimed to possess, such as the invoices drawn on it and the ledger account in its name in Aravalli's books. That was the best opportunity the assessee had to prove its case that it was the owner of the cylinders which it leased to Janta. Fourthly, the discharge receipt issued by Aravalli to the assessee acknowledges the receipt of the three cheques, all dated 20-3-1995, even prior to the authorisation claimed to have been issued by Janta to Aravalli. The discharge receipt no doubt says that the cheques were received 'towards supply of empty cylinders on your behalf to M/s. Janta Gases Pvt. Ltd. vide Bill Nos. 110, 111 & 112, but that by itself does not prove that the relationship between the assessee and Janta is that of lessor-lessee. The receipt does not show the nature of relationship that existed between the assessee and Janta. All that the receipt says is that the cylinders were supplied to Janta on behalf of the assessee. That would have been the position even if the assessee had merely acted as financier. Above all, R's statement is categorical and clear, as evident from the answer to a question posed by the assessing officer. [Para 19] The assessee was unable to prove the purchase of the assets from Rajaji, nor was Rajaji able to furnish the details of the sale of the assets to the assessee. While in the case of LPG cylinders the assessing officer did not doubt the existence of the assets but took the view that the nature of the transaction between the assessee and Janta was one of a financing and not that of lease, in the case of airjet spindile and positar disc the very existence of the assets, and consequently the claim of ownership of the assets, is suspected. There was no reason why Rajaji, from whom the assessee claims to have purchased the assets, should not furnish the relevant particulars and chose to evade the notices/summons issued by the assessing officer. It ultimately furnished only skeletal particulars a mere affirmation of the sale, that too, without charging sales-tax as the copy of the invoice showed. Its sales-tax registration number and income-tax PAN number were not capable of proper verification, leading to the very existence of Rajaji coming under grave suspicion. The assessing officer acted fairly by asking Maruti, to whom the assets were claimed to have been leased by the assessee, to produce the relevant assets inward register and explain the mode by which they were transported to its factory. This evoked a response which cannot be countenanced that no such registers were being maintained by Maruti, and a very unusual or strange plea that the assets were transported by their own cars, which are passenger cars and not goods vehicles; even then, the assessing officer was fair enough to ask them to show their log books showing the movement of the cars, which could not be produced as they were not maintained. There was thus precious little material before the assessing officer from which he could accept the plea of ownership or even the existence of the assets for the purpose of claiming depreciation. [Para 24] The Commissioner (Appeals) did no better than the assessee as the quoted paragraph from his order would show. The Tribunal proceeded to view the paper-work as sacrosanct even when there was enough material to excite its suspicion. The fact that there was a lease document, insurance policy, accounting entries in the books of the assessee, security offered by Maruti, issue of legal notices on Maruti for default in the payment of lease installments and so on, described by the Tribunal as 'overwhelming evidence', are all facts which are neutral and would have to necessarily exist in support of the claim for depreciation. The question before the Tribunal really was whether the assessee can be said to have discharged its burden of proving ownership over the assets in the light of the inability of Rajaji to explain the supply of the assets and the complete lack of material in the records of Maruti, the alleged lessee, to show the receipt of the assets into its factory. It seems with respect, that the Tribunal failed to probe the transaction and look beyond the documentation and to apply the standard of proof required of the assessee to prove ownership of the assets, even when there was no real evidence worth the name in favour of the assessee. [Para 25] The Tribunal ought to have applied these judgments to test the evidence adduced by the assessee in the light of the material gathered by the assessing officer, the conduct of the parties and other surrounding circumstances. The Tribunal, with respect, seems to have proceeded merely on the basis of the documentary evidence without putting it to rigorous examination in the light of the aspects highlighted by the assessing officer. In the case of LPG cylinders, the transaction was only a financing transaction and was not a lease as there is no material to show that the assessee became the owner of the cylinders and leased them to Janta; in the case of air jet spindles and positar disc, the very existence of the assets and the genuineness of the purchase of the assets by the assessee was not proved. In both the cases, therefore, the assessee was not entitled to depreciation. [Para 26]